I can't tell you what stocks you should buy, but I can go over the nuts and bolts of one of my core holdings. McDonald's (NYS: MCD) is one of the more popular stocks in our CAPS community, with a five-star (out of five) rating. Of more than 6,000 active CAPScalls, nearly 5,800 of them -- including mine -- say the stock will outperform the S&P 500.

More than 27,000 of the company's 33,735 restaurants are franchised. That means the majority of its profit comes from franchise fees, not directly from burger sales. Arcos Dorados (NYS: ARCO) , the world's largest McDonald's franchisee, alone operates more than 1,800 restaurants in Latin America and paid McDonald's nearly $43 million in royalties last quarter.

Although it's a U.S.-based company, McDonald's has a worldwide footprint. Last quarter's revenue included euro, renminbi, yen, pesos, and other currencies from around the world. That does expose the company to exchange-rate risks, which can change from headwinds to tailwinds from quarter to quarter.

Geographic Area

Revenues(Millions)

Percent of Total

United States

$2,242

32.4%

Europe

$2,741

39.6%

Asia, Pacific, Middle East, and Africa

$1,548

22.4%

Other countries and corporate

$385

5.6%

Total revenues

$6,916

Sources: Latest 10-Q report and author's calculations.

In addition to its strong brand, the dividend yield is a key reason I own this stock. At a little more than 3%, it tops the yields on most high-quality bonds. More important, the company has raised its dividend every year since it began paying one in 1976. With a payout ratio -- the portion of earnings paid as dividends -- of around 50% and projections for continued revenue and earnings growth, McDonald's has the ability to continue giving shareholders those nice annual raises.

Of course, McDonald's isn't the only company with a strong brand and a growing global business model. Your research process should include a look into competitors and companies with similar businesses to see whether they may be better candidates for your portfolio. Fellow fast-food operator Yum! Brands and coffee star Starbucks offer higher projected growth estimates, but they don't match the dividend story at McDonald's, and they trade at higher forward P/E multiples.

There's more to picking a stock, but learning the business profile, checking key valuation measures, tracking down where and how a company makes its money, and reviewing some competitors should always be part of the research process.